Winter is coming... to Brazil
What if millions of coffee bushes were damaged and global coffee prices spiked dramatically?
For the past 15 years, a Coffee Futures chart has sat up on the wall at Bennetts HQ. It follows the price of a pound of coffee over recent decades, always reminding us of what happens when the weather turns. Just over 20 years ago, two cold frosts hit the coffee growing regions of Brazil in the space of two months. Millions of coffee bushes were damaged and global coffee prices spiked dramatically.
As the world’s largest coffee producing country, Brazil produces between a quarter and a third of global coffee supply. It is also the only large producing country vulnerable to frost. This leaves the market highly vulnerable to disasters like the frost in 1994. Whilst the majority of the 1993/4 crop had already been harvested by July when the frost hit, there was a big threat posed to the 1994/5 harvest. In anticipation of a global increase in demand, prices more than tripled within only a few months. As it turned out, the first frost destroyed the buds of the coffee bushes, tarnishing between 50-80% of the following year’s crop. Prices for that harvest soared even higher. Basically, it took three years before prices settled to their pre-frost levels.
Frost is not a frequent devastation to the coffee industry, but it is a constant possibility for us to be aware of. Prior to 1994, the previous severe frost was in 1975. Amid these frosts, six rainless months in 1985 also dragged the following year’s production down to 11 million bags. Other than these occasional hitches, the conditions of South and Central Brazil are generally very accommodating for coffee growers and their farms. Having said that, we are all familiar with Murphy’s law.
So the question we think is a necessary one to ask: what happens when (rather than if) we experience frosts like those in 1994 or 1975? One thing we can be sure of is that prices will be unpredictable. Depending on the type of frost and the time of year that it occurs, they really could go anywhere. In the current modern global community, we live in a time where information spreads more rapidly than any other point of time in our history. This connectivity with the volatility of the market, also means prices will jump almost immediately in anticipation of demand trumping future supply. Only once the damage is properly inspected and crop starts to flower again can the market make true assessments of the future harvests and their prices can be made. Simultaneously, there could also be drawbacks from supply in terms of quantity. This would of course be determined by the severity of the damage. Roasters should take this time to seriously consider a frost plan and how they continue to run their business when prices double or even triple in a very short space of time.
As aforementioned, the degree of damage caused by frosting depends on the time of year that it strikes. Frosts surfacing during the typical harvesting period of May through to July may burn the coffee beans. This leads to substantial loss for that year’s harvest. On the other hand, if the frost comes after the harvesting period, only the coffee bushes could be affected. This can be less damaging because there is a chance for them to recover before the following year’s harvest. In the worst case scenario, the most devastating frosts are those that occur late in winter (August-September) because they can wipe out the buds and the flowers, meaning coming and future harvests can be lost. The majority of coffee frosts in Brazil occur in southern growing regions between June and August, the coldest period of the year.
There are two types of frosts that pose a threat to the coffee crop, radiation and winds frosts. Radiation frosts occur on calm nights when cool air is dry. They may not leave ice on coffee leaves, but the cold air can freeze water inside the cells of plants, causing severe damage (black frost). Conversely, wind frosts occur in adverse conditions with strong winds, often in mountainous areas. Wind frosts are more common, particularly in Brazil, but their damage is not as severe.
So… being armed with this information, we can all feel a little more prepared for any future hiccups, but let’s hope we don’t need to worry any time soon!